Finding small business financing can be tough, especially if you're looking for new business financing. Friends and family, no matter how supportive, can be quickly tapped out and traditional sources of small business financing such as banks and venture capitalists are historically not particularly interested in financing small businesses, especially start ups.
Fortunately, the federal government's Canada Small Business Financing Program makes accessing small business financing easier for both established and new businesses.
How Much Money is Available?
The program provides up to $500,000 of small business financing for any one business.
Who Is Eligible for the Canada Small Business Financing Program?
To qualify for a business loan under the Canada Small Business Financing Program you have to be carrying on a business for profit in Canada which has gross annual revenues of $5 million or less.
Farms, charitable and/or religious organizations and non-profits do not qualify.
What Can the Money Be Used For?
The catch to the Canada Small Business Financing Program is that these small business loans can only be used for specified purposes. As the federal government puts it in the program brochure, a CSBF loan can be used to finance up to 90% of the cost of:
- purchasing or improving land, real property or immovables;
- purchasing leasehold improvements or improving leased property;
- or purchasing or improving new or used equipment.
So you can't use a Canada Small Business Financing Program loan to finance something such as goodwill or franchise fees, or to serve as working capital.
On the plus side (and it's a big plus) both established and new businesses have equal access to these small business loans.
How Does the Canada Small Business Financing Program Work?
Another great thing about this federal small business loan program is how easy it is for small businesses to apply. While the program is administered by Industry Canada, it's delivered locally throughout Canada. To apply for the Canada Small Business Financing Program, all you have to do in most cases is meet with a loans officer at your own bank, credit union, or caisses populaires and fill out a loan application. If the lender decides to grant your small business loan, the lender will register your loan with Industry Canada.
(Note that the individual lenders make all the credit decisions, not Industry Canada.)
What Are the Interest Rates & Fees?
The financial institution you are dealing with sets the interest rate for your small business loan; the interest rate may be variable or fixed. If the interest rate is variable, it cannot be more than 3% above the financial institution's prime lending rate. If the interest rate is fixed, it cannot be more than 3% above the financial institution's residential mortgage rate.
You will also have to pay a registration fee of 2% of the loan. This fee can be financed as part of the loan.
(The registration fee and a portion of the interest are submitted to Industry Canada by the lender to help offset the costs of the program for the government.)
A Good Deal for Financing New Businesses & Established Ones, Too
Whether you're looking for new business financing or for financing for your established small business, the Canada Small Business Financing Program is a good deal. Borrowing costs are reasonable and the program is very accessible to any small business as it's locally delivered and has few constraints on eligibility. If the program meets your needs, why not call or visit your local financial institution today and get the application process underway?